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GST rate cut - Happy times for Used Car buyers

If you are planning to buy a ‘new’ pre-owned car, then this news could just bring rejoice for you. The Goods & Services Tax (GST) council has decided to reduce GST on used cars to 12-18%. The additional cess on the used cars has also been scrapped by the 25th GST Council Meeting held on 18th January.

Earlier, GST applicable was 28% on pre-owned cars along with an additional cess varying from 1% to 15%. The new rates have come into effect from 25th January and this Republic Day has brought you more freedom to buy your planned used car.

Organized second hand car dealers and buyers have received a timely breather from this decision. With GST, additional cess and dealer’s profit added, it was a tough ride for used car buyers post GST-implementation. Industry experts believe, the pre-owned car market was under huge pressure and this rate cut could bring a fresh wave of exuberance.

Here are the salient effects of the decision taken by the GST council:

Rate cut on various segments

The GST rate on small and compact used cars have been cut to 12%, and to 18% on used medium, large and SUV cars from existing 28% on both the categories. The additional cess of 1-15% on both the categories have also been removed.

As a result, used car prices will drop significantly. Under earlier GST rates, tax and cess on new and used vehicles were the same.

Used Car Market to Grow

These announcements will surely favour the used car market which saw disruptions after the GST was imposed. Earlier, effective GST was 28 to 43 percent on dealer margins. Industrialists believe this is a very positive move and could provide impetus to the industry.

The CEO of a popular used car online portal said, “Removal of cess, according to us, is a great initiative since it has decreased the tax rate incidence from pre-GST era. This will definitely outpace the new car industry growth rate and carve the perfect opportunity for used cars to grow as a segment.”

Used Cars to become cheaper

The margins for the second-hand car dealers will increase and it allows them to provide heavy discounts to the customers. This means second-hand car buying experience will be delightful and it will not burn a hole in your pocket. It is expected that these tax benefits will be passed on to the consumer, thereby providing a boost in sales.

So now, it’s the perfect time to upgrade yourself and your family from a bumpy two-wheeler ride to a comfortable four-wheeler drive or replace your small car with a luxurious sedan or SUV.